Quick Snapshot of today's employment report. 175,000 net new jobs created. But are they "good jobs"? See the evidence here...

In May the BLS reports the number of new jobs created (net) was 175,000 (first yellow highlight).

Of those 175,000 jobs the big gainers were in the categories of Retail Trade (+27,700), Temporary Help Services (+25,500) and Leisure and Hospitality (+43,000).

These three sectors accounted for 96,200 of the jobs created, or 55% of the total.

Not sure what the breakout is, but I would say a good portion of these jobs are part-time, lower wage positions. No data to back that up having worked in those sectors in my lifetime, I think from experience I am safe in than conclusion.

It is great that we are creating these jobs.  But are we creating a healthy, vibrant economy.

I don't think when over 50% of the new jobs are in these categories we are.  What do you think?

New revision to the number of jobs needed to maintain a steady unemployment rate. The change is dramatic and of consequence!

When the monthly employment report is published by the Bureau of Labor Statistics (BLS) it reports the number of new jobs created and lost during the month and the change in the unemployment rate.  In a seemingly odd quirk, when there is a net gain in jobs created sometimes the unemployment rate goes down (as it seems it should) OR up (as it seems it SHOULDN'T).  How does that happen?

Variables such as a change in population due to birth rates or aging, new entrants such as high school or college graduates, immigration, can affect the number of people classified as part of the labor force.

In a recovering economy the only way to bring down the unemployment rate is to have net job creation that is greater than the number of new entrants/re-entrants into the labor force PLUS some that are already in the labor force but are currently classified as officially unemployed.

 Net job creation can be positive but unless it at least EQUALS the change in labor force then the unemployment rate will stay the same.  If less, then the unemployment rate will increase (ceteris paribus).

Previously in the media and in the economic blogosphere, economist have suggested that we need anywhere between 150,00 to 225,000 net new jobs just to keep up with the increase in the labor force.

A new study from the Federal Reserve suggests this number is MUCH lower, about 80,000 per month!

Here is a short excerpt.  The paper is very short and has some interesting graphs. I encourage you to read it to keep up on this important trend in the labor markets!

Estimating the trend in employment growth

For the unemployment rate to decline, the U.S. economy needs to generate above-trend
job growth. We currently estimate trend employment growth to be around 80,000 jobs
per month, and we expect it to decline over the remainder of the decade, due largely
to changing labor force demographics and slower population growth.

Did Disney raise its admission prices just to keep up with inflation? (Also a link to historical prices to the "Happiest Place on Earth")

This is an extension of a Disney post on the recent price increase. Here is that one.

Below is a single day ticket for entry into Disney World from 2003 (for a list of historical admission prices to Disney, go HERE). Note is says entry into Epcot for $52.00 but that was the price to get into any of the parks.

For the first time Disney has priced Magic Kingdom at a different price than the other parks.  Magic Kingdom now costs $95 for a one day ticket. It costs $90 for a one day ticket to the other theme parks.

I have read in several places that Disney has increased the price of admission well beyond the rate of inflation for the year. True enough. But what about longer term?  Maybe they are just making up for lost ground with not being able to raise prices enough in the past?

According to this BLS inflation calculator, $52 in 2003 in today's dollars would be  $65.72. Yikes! The ticket price today  is well beyond the 10 year rate of inflation. $95 - $65.72 = $29.28 divided by $65.72 = 45%.

I think they are doing fine on the keeping up with inflation front.

Source: HERE

Nice interactive showing various occupations and median income earned in those occupations...Know before you go (for it)...

Kinda cool.  It shows various occupations, the number of people in those occupations and the "median" income earned in those occupations.

Click image to open interactive version (via Rasmussen College).

Disney has just (this week) increased the admission price to its theme parks. Here is the rest of the story not reported by the media (yet).

For Disney Fans this is important.  Admission prices to DisneyLand and DisneyWorld have just increased AND they have disaggregated a ONE-DAY ticket to Magic Kingdom from the rest of the parks.  Previously admission prices to ALL of the theme parks were the same.  If you buy a multi-day ticket it includes Magic Kingdom as one of the parks you can visit.

Below I pasted the new price list from the Disney website. The new prices are in BLACK and the previous prices are in RED (I inserted those).  I also put a circle around the Magic Kingdom ticket to highlight that it IS different from the rest of the parks now.

I also calculated the percentage change in price for Adult tickets (age 10 and over) and a child's ticket (3-9). You will see those numbers to the left.

Source: Disney Website

I have read (and just saw on the news) only about the 6.7%  change in price for the single ticket price for Magic Kingdom.  The price single ticket price for the other parks increased too, but only by $1.00 (+1.12%).  That is positive, right?

What I have NOT seen is an analysis of the how the Multi-Day ticket prices are impacted.  After all, who REALLY only goes to DisneyWorld for just one day!!

Look at those change in prices and percentage changes as you buy additional days.

I think Disney believes the 3 and 4 day purchaser of tickets are not going to significantly reduce their quantity demanded for days at the theme parks.  Demand for those tickets isrelatively Inelastic.

They are probably right. If you can afford to visit the parks for that many days then an 8%+ price increase is not going to discourage consumption by more than that percentage change in price.

FYI: Here is the photo of admission prices in January 2013 when I last visited Disney Orlando.  This is where I got the price data in RED above.

Wall Street is saving the housing market and the economy!! Reminds me of the arsonist who sets the fire then puts it out. I GUESS we are thankful. Read here why...

NYTIMES

If you are interested in "going deep" with your knowledge of various underlying fundamentals contributing to our economic recovery, here is an article that explains the role BIG Wall Street investment firms are playing in housing markets that were the MOST adversely affected during the Great Recession.

"...The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time — Wall Street big.

Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing....

Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.

This is a good thing, for the most part. But it is difficult to not be a little cynical, at least for me.

Interesting twist. The institutions (not necessarily the SAME ones) responsible for the run up in housing prices and subsequent bust are now aiding in the recovery of the housing market in the hardest hit areas.

Reminds me of the arsonist who sets a fire then comes in and saves the day by putting it out and rescues people.   They might consider themselves a hero but  they are still an arsonist at heart.

The use of credit gives us a sugar high. The following funk is the debt we pay for that high. How come we understand that with our physical health, but not our financial health?

My cyber friend over at The New Arthurian Economics has a blog posting that is deceptively short and may seem obvious, but I don't think people in general have a real appreciation for the distinction between "Credit" and "Debt" as it applies to their lives.

Debt is not good for growth. Credit use is good for growth. Debt is what remains after the benefit of credit use has passed.

Debt is bad for growth. Credit use is good for growth, and debt is bad. Yin and yang, shadow and light.

You go to the bank, borrow some money, and buy yourself something nice. That's credit use. It's good for you, and it's good for the economy.

A few weeks later, your first payment comes due. That's debt. It's bad for you, and bad for the economy.

I want to discuss this in class.  Read it again.  Then read the second sentence again and think hard about it, especially the significance of the words "benefit of credit use" in context of the sentence and the paragraph.

Let me give one example of what this means to me.  I would like you to come up with an example or two of your own and share.

I have $5.00 cash in my pocket and I am hungry.  I  can buy a hamburger, fries and a drink at McDonalds for that $5.00.  I pay cash, I eat, I am done.  Or, I could go to Chillis and buy a hamburger, fries and a drink but it will cost me $10.00 (gotta leave a tip).

Assume I pay $5.00 cash that I have in my pocket and put the remaining $5.00 on my credit card. My belly is full either way but in one case I have derived the short term benefit of eating at Chillis ("Nice Atmosphere AND the waiter was SOOOO funny!!")

Four weeks later I get the bill from my credit card company for the $5.00.  I have $5.00 (maybe) to pay the bill, but that means I can't spend $5.00 on something else at this time.  And I am hungry again to boot!!

If I had paid cash in the first instance (foregone the Chillis experience) I would be fed and have no credit card payment in 4 weeks.  I would likely have another $5.00 at that time and I could buy another meal.

In which case am I better off? The economy as a whole?

I think this is what Art is referring to.

If I ever meet Art I will buy him lunch---probably at McDonalds.  I don't like debt.   :)

Why there is a future for manufacturing but not manufacturing jobs. Nice video of a BMW factory makes the point for us all.

If you need a simple illustration as to why there is a future for manufacturing, but not a future for manufacturing jobs (to assemble mainly), then take some time to watch this video. 

How BMW's are made.

In addtion to the technology, I was amazed at how quiet the manufacturing floor was.

The writing is on the wall, but it is being written by a robo-pen.  HT: Cafe Hayek.

1 Billion fewer people living in Extreme Poverty in the world just since 2000. Who (or what) is responsible for this miracle? Nice graphic here.

Here is a graph from The Economist showing the dramatic decline in the number of people in the world living on $1.25 per day (or less).  This is the formal UN definition of "Extreme Poverty". 

Focus on the span between 2000 and 2013 (guesstimate). The slope gets steep--approx 1 Billion people have climb above the $1.25 mark in 13 years.  Keep in mind, since 2000 the world population has GROWN by about 800 million as well. 

While this is good news, the drop was not evenly distributed.  China alone is responsible for about 75% of the decrease.  Of course, this is mostly due to the rapid industrialization and globalization China set in motion with more market orientated (very loose and generous definition) policies in the 80's and 90's.




Source: The Economist

The High School Yearbook industry is being challenged. I say "AMEN TO THAT". Bet you do too. See here why...

 Creative Destruction is a term credited to economist Joseph Schumpter that describes the process by which market activity evolves to change or challenge existing market structures. In other words, new ideas, technology, innovation or processes emerge to replace current ways of providing goods and/or services (that is my simplistic explanation---go to the link above for much more detail).

One area ripe for this to take place is the stodgy business of High School Yearbooks.  For A LONG TIME the business has run on the same inefficient model.  Here is an article highlighting a young entrepreneur who saw an opportunity to challenge this traditional model:

Most Likely to Succeed  The school yearbook business is a scandal. Here’s how to fix it 

When Aaron Greco, a young tech entrepreneur, started sniffing around the yearbook business a few years ago, he was surprised by these shenanigans. The fundamental problem with the yearbook business, he realized, was that big yearbook providers were producing their books using offset printing—an expensive printing system that’s great for books with large print runs but that leads to high costs and little flexibility for yearbooks, whose print runs number in the hundreds or low thousands. Over the past decade, we’ve seen the rise of digital on-demand printing, which is now commonly used for photo books (the sort you order from Shutterfly or Blurb) and self-publishing. Greco had a brilliant idea: Why not use the same printing process for yearbooks?

This is a good example of the power of a free people operating in an open marketplace coming up with a better way of doing something and with hard work and perseverance challenge an existing market structure.

I highlighted "open" because if existing yearbook providers don't want to (or can't) compete then they may try to limit challengers by using the political process to put up barriers. That is called Crony-Capitalism. 

I hope this does not happen in this case, but it would not surprise me. 

We need more Creative Destruction, not less.  It makes the world a better place.

Interested in a FREE crash course in the Basics of Supply and Demand??

NOTE: Due to an OVERWHELMING response for this class, I have had to cut off enrollment.

However, I WILL offer the class again the Week of June 17th if you are still interested. PLEASE check back here for more details on how to sign up for that class.

I apologize for the inconvenience.  Who knew Supply and Demand would be so popular!! :)


I am offering a FREE 5 day course on the basics of Supply and Demand.  It is designed for high school students but enrollment is open if parents would like to join in as well.  While there is no obligation at all with this offering, I am recruiting for my Fall 2013 Online AP Macroeconomics class (please go HERE to find out more about that).

Class will be held Monday through Friday the week of June 10th.  Time will be 10:00am Central Time.  Classes will last at least 1 hour and 15 minutes each.

If you are interested please click on the link below and sign up.

Once the class fills up, I will e-mail you with more information

HERE is a listing of the Demand and Supply objectives we will cover. Or go HERE to Mr Welkers Website where the objectives are nicely explained.

May you always be in equilibrium.  Thank you!

Infographic showing Return on Investment per Corporate lobbying dollar spent. Crony-Capitialism at its finest. Get ready to be angry!

Does lobbying our elected officials pay-off?  I think so, based on these numbers.  Shows what the return to various industries is on the investment of each lobbying dollar spent to protect their interests. 

Go HERE for a larger image. (HT: Marginal Revolution)

E-waste, recycling and "good intentions". What happens when you hurt the people you are supposedly trying to help?

When viewpoints based on prior information (faulty or not) have been rendered obsolete why are we slow to change those views?

Is it because we have established a reputation based on those assumptions and to question would be to question our purpose?  I think this is more common than we think.

This opinion piece from Bloomberg suggests this is what it going on in the Electronic Waste (so called "E-Waste") industry and the negative environmental impact of E-waste is way overstated. 

I am not smart enough to know if this big picture story is true. But I am aware enough to know as a byproduct of sweeping policies to address a problem more often than not results in negative un-intended consequences.  Usually they are predictable but are not taken into consideration in the implementation of the policy.

"...This misunderstanding has led to several efforts at erecting partial export bans on U.S. electronics to developing countries, which -- other studies demonstrate -- import them as cheap and sustainable alternatives to new equipment. As a result, perfectly usable electronics are diverted into a recycling stream, where they are turned into raw materials, rather than into markets where they can be reused for years..." (Bloomberg) 

A conflict between "Reuse, Recycle" in triad of "Reduce, Recycle, Reuse" seems to have emerged. 

Interest groups have taken the "Seen" negative consequences of E-waste imposed on the few and put it above the "Unseen" positive effects that it may confer on the many.

Additional information tends to get in the way of our firmly held beliefs, doesn't it??

Soft drinks and Federal Food Assistance ("Food Stamps"). See here why Coca Cola is so interested in this relationship...

Just doing some reading and came across an article on Coca-Cola's lobbying effort to make sure soft drinks are not excluded from purchase under the SNAP program (formerly known as "food stamps).  SNAP stands for Supplemental Nutrition Assistance Program. 

I wondered why they would be so interested.

The lobbying group Science in the Public Interest estimates that $4 Billion of the $80 Billion allocated to the SNAP program (that's 5%)  is spent on carbonated soft drinks by recipients. This total does NOT include non-carbonated drinks like Monsters, Gatorade, etc, so the total on high sugar content drinks is likely significantly higher.

I was curious about how much this $4 Billion in transfer payments was as a percent of total soft drink sales.

In 2012 total soft drink sales were about $60 Billion, however that includes all outlets where soft drinks can be purchased such as restaurants, vending machines, sporting venues, grocery and convenience stores.

SNAP benefits cannot be used at all these locations. They can only be used at grocery and convenience stores primarily.  According to a WSJ article total sales in grocery stores and convenience stores are about $28.7 Billion of the $60 Billion.

$4 Billion as a percent of $28.7 Billion is 14% of total soft drink sales that are derived from the SNAP program.

NOW I know why they are so interested---that is substantial for the industry...and Coke.

Let the special interest money flow...

"Eat Mor Chicken" is the market response to "Where's the Beef?"---Nice graphic showing what is happening in the meat market...

A nice teaching moment courtesy of The Wall Street Journal. The graphic below illustrates how the increase in the price of beef at the wholesale level is increasing the price at the retail level AND  it is affecting the demand for a related good---Chicken.  Makes illustrating the concept of Substitutes pretty easy.

In economics, goods are substitutes if a DIRECT relationship exists between the change in Quantity Demanded of one good and the change in price of a second good.

If Price of Good 1 increases and the Quantity Demanded for Good 2 increases, and vice versa, if the Price of Good 2 decreases and the Quantity Demanded for Good 2 decreases then the goods are Substitutes.

You can see as the price of beef increases the demand for Chicken and Pork increases as well.  Now, there could be other reasons the demand for chicken/pork has increased other than the price of beef.

There is your homework.  Get to work! :)

Source: Wall Street Journal